Facebook and Twitter Set Off New Platform Wars

Facebook Inc. employees work at the company's campus in Menlo Park, California.

There’s been a lot of virtual ink spilled lately about how Twitter has been flexing its platform muscles by cracking down on the use of its API and—some argue— squeezing the life out of its ecosystem. It’s worth noting, though, that Facebook (FB) is not above throwing its weight around, too. Developer and entrepreneur Dalton Caldwell has written an enlightening tale about a meeting he had with the company’s platform-and-partnerships team, in which he says Facebook basically threatened to destroy his startup if he didn’t agree to sell it. While social networks such as Twitter and Facebook may be relatively new, the struggle over control vs. openness when it comes to platforms is as old as technology itself.

Caldwell—who has since pivoted App.net, his startup, and is trying to turn it into a user-financed version of Twitter through a Kickstarter-style funding campaign—says in an open letter to Facebook Chief Executive Officer Mark Zuckerberg that he expected the meeting to be about how his company could work with the social network to benefit both sides, but it turned into something much more threatening. As Caldwell describes it: “Your executives explained to me that they would hate to have to compete with the ‘interesting product’ I had built, and that since I am a ‘nice guy with a good reputation’ that they wanted to acquire my company to help build App Center.”

The obvious implication, Caldwell says, was that Facebook was prepared to destroy the startup venture unless the entrepreneur agreed to sell it: a modern version of the old mob shakedown routine, in which the enforcer says something like “Nice family you got there—be a shame if something was to happen to them.” Or, as Caldwell puts it in his letter to Zuckerberg, “Your team doesn’t seem to understand that being ‘good negotiators’ vs. implying that you will destroy someone’s business built on your ‘open platform’ are not the same thing.”

Ironically, Caldwell says in his letter that one of the reasons he wanted to develop something on top of Facebook was that the Twitter platform was “even more of a joke than the Facebook platform” when it came to treating outside developers well. Twitter’s moves to close down more of its API—as it did recently by shutting off Instagram’s access to the follower list of Twitter users—have stirred widespread criticism from developers, many of whom argue that outside services were a large part of what generated the social value Twitter is now trying to monetize.

Both Facebook and Twitter have gone through similar evolutions in their relationships with outside developers and third-party services: Just two years ago, Twitter held a developers’ conference called Chirp that was aimed at reaching out to companies—in part to clear out some of the bad blood in a relationship that co-founder and former CEO Evan Williams later admitted had been handled badly. At almost the same time, Facebook held a developers’ conference called f8, where it launched the “open graph” platform that services such as Caldwell’s app center (and Zynga’s (ZNGA) social games) were built upon.

As pressure to monetize their networks has increased, however, both companies have stepped up the control they exert over their platforms—by restricting what outside services can do, by acquiring companies or recreating the features that they offer, and in some cases by making veiled threats of the kind Caldwell describes. As entrepreneur and venture investor Chris Dixon noted on Twitter, this kind of behavior is not new: “I’ve heard ‘sell your company or we’ll kill you’ many times. Once bigco decides it’s strategic, they’ll get it one way or another.”

There are obvious similarities between what both Twitter and Facebook are doing and the approach taken by previous technology giants such as Microsoft (MSFT) and Apple (AAPL). Microsoft was infamous for what was internally called its “embrace, extend, and exterminate” strategy, which some say often involved meetings with outside services whose features were then duplicated by the software giant. Apple is well-known for controlling its platform more tightly than probably any other technology player in recent memory—and for making changes that benefit itself, regardless of the impact on others.

In some ways, this kind of process is completely natural and even has some parallels outside technology. For example, Jonathan Glick of Sulia has compared the approach that Twitter and Facebook have taken to the economic doctrine of “mercantilism,” in which states try to control the way their subjects and colonies can trade with outside parties. Not surprisingly, this approach has also been the cause of a number of wars—the real kind, with guns, not the metaphorical kind. Others have called it “API Darwinism,” implying that it’s a form of natural selection that favors the strongest.

Does this make what Facebook and Twitter are doing right, just because it’s common behavior? That depends on whether you’re an investor, a developer, or a user. Even developers can’t seem to agree: In comments at Hacker News on Caldwell’s post, as many people argue that Facebook’s behavior was completely justified and normal—and the entrepreneur was naive to expect otherwise—as those who support him with criticism of the social network. Meanwhile, Google+ (GOOG) head Vic Gundotra is trying to position his network as the friendly alternative.

Twitter and Facebook must beware becoming so controlling and dismissive of their ecosystem and/or their users that they wind up giving their competitors more ammunition, and eventually lose their network effects to a newcomer, as Myspace (NWS) did to Facebook. Apple may have been able to increase its dominance, despite taking a strong-handed approach. But if recent history has shown us anything, it’s that not every company can be Apple.